The case of Mintz v. Mark Bartelstein & Associates d/b/a Priority Sports & Entertainment, recently filed in the Central District of California, provides an interesting look at both non-compete and trade secret law, as seen through the world of a sports agent.
Aaron Mintz, a National Basketball Players Association (NBPA) certified player-agent, allegedly resigned from Priority Sports & Entertainment on March 23, 2012. Immediately following his alleged resignation, Mintz signed a contract with Creative Artists Agency (CAA), a competitor agency.
On the day of Mintz’s resignation, he filed a complaint for declaratory relief against Mark Bartelstein & Associates, Inc., d/b/a Priority Sports & Entertainment. Mintz’s claim for relief was based on the argument that non-compete agreements are illegal under California law. The terms of Mintz’s contract with Priority Sports & Entertainment contained a two-year non-compete clause, which prohibits Mintz from representing any Priority Sports & Entertainment clients, either directly or indirectly. Under the terms of the contract, both parties consented to the jurisdiction of the Illinois State Courts. According to Mintz, however, the court should apply California law and the restrictive covenant should not be enforced because its enforcement would be contrary to public policy, since such provisions are prohibited under California Business and Professions Code Section 16600, restrictive covenants are prohibited in the employment context.
Although the parties’ choice of law agreement generally governs which law is applied, in Hughes Electronics Corp. v. Citibank Delaware, the court held that if the chosen state’s law is contrary to a fundamental public policy of the forum state, the parties’ choice of law will not be enforced. Here, Mintz argues that the prohibition of non-compete agreements is a fundamental state policy, and as a result, the court must consider the effect of the non-compete clause, which would restrict him from competing in his trade within the state he lives in, and decide in his favor.
Since the initial complaint was filed, Priority Sports has filed an answer, along with a number of counterclaims against both Mintz and his new employer, Creative Artists Agency (“CAA”). Priority Sports alleges that Mintz and CAA are engaged in “a reckless and relentless claim to improperly solicit Priority Sports’ clients by misappropriating and misusing Priority Sports’ confidential, proprietary and trade secret information and by tarnishing Priority Sports’ and Mark Bartelstein’s good name.” According to Priority Sports' counterclaim, Mintz has been working for CAA for months, even though he was still under contract with Priority, a direct competitor.
Priority Sports asserts a variety of counterclaims, including breach of contract, breach of the covenant of good faith and fair dealing, breach of the duty of loyalty, intentional interference with contractual relations, intentional interference with present and prospective economic advantage and business relationships. Additionally, the company alleges misappropriation of trade secrets, conversion, and violation of California Penal Code section 502, stem from Mintz’s removal of Priority Sports’ property, including files, a laptop, cell phone and office keys, as well as business emails and customer lists sent to his Gmail Account.
Priority further alleges defamation, trade libel, conspiracy, and unfair business practices under the California Unfair Business Practices Act. The company alleges Mintz made statements defaming both Bartelstein and Priority Sports, including suggesting that he had done “all the work” and that there was likely to be a “mass exodus” of players from Priority Sports’ client roster. It is also alleged that Mintz was working for and soliciting clients for CAA, even while he was still employed by Priority Sports, and that Mintz disclosed confidential information to CAA regarding his former employer.
Following Priority Sports’ answer and counterclaims, Mintz curiously initiated an additional lawsuit against both Priority and Mark Bartelstein individually in the Central District. Mintz’s new lawsuit alleges Priority Sports has engaged in an “unrelenting campaign of illegal conduct,” including, “impersonating Mintz in order to gain unauthorized access” to his internet account. Mintz also alleges Bartelstein has made false statements to third parties so as to interfere with Mintz’ prospective economic relationships with clients. Mintz asserts seven causes of action: violation of the Computer Fraud and Abuse Act, violation of the Electronic Communications and Privacy At, violation of the California Data Access and Fraud Act, defamation, invasion of privacy, interference wit prospective economic advantage, and unfair business acts and practices.
The court’s decision as to whether to apply California or Illinois law is likely to be a key factor in this case, as it plays a significant role in determining whether the non-compete agreement should be enforced. It will also be interesting to see if Priority Sports opens up a second front in Illinois to attempt to enforce the non-compete. Additionally, what the court chooses to consider a trade secret in the sports agency context will also likely play a role in the case’s outcome. John Marsh has also blogged on this high profile case at his trade secret blog, Trade Secret Litigator. With all of the allegations each party is making, it is difficult to predict how this case will turn out, but we will continue to keep you posted as the case progresses.